Carnival Tops Estimates in Period Marked by Terror, Zika Worries

  • Rising cruise demand in China is boosting fares, analyst says
  • Company begins approval process to add more sailings to Cuba

Carnival Corp., the world’s biggest cruise operator, rose the most in a year after posting earnings that beat analysts’ estimates in a quarter marked by concerns over terrorism in Europe and the Zika virus. The company also raised its profit forecast for all of 2016.

Carnival rose 5.5 percent to $52.37 at the close in New York, the biggest one-day gain since March 27, 2015. No. 2 Royal Caribbean Cruises Ltd. advanced 5.7 percent, as did Norwegian Cruise Line Holdings Ltd.

Miami-based Carnival overcame concerns about the Zika virus in the Caribbean region, the company’s biggest market, and terrorism concerns in Europe following the November attacks in Paris. So far, the company isn’t seeing any fallout from the latest incident in Brussels, executives said Wednesday on a call with investors. The best growth is coming in China.

“We feel really, really bullish in China,” Chief Executive Officer Arnold Donald said in an interview. “We are still at the very beginning.”

First-quarter profit excluding some items almost doubled to 39 cents a share from 20 cents a year earlier, the company said in a statement. That exceeded the 32-cent average of analysts’ estimates compiled by Bloomberg. Revenue grew 3.4 percent to $3.65 billion in the period ended Feb. 29, compared with estimates of $3.63 billion.

2016 Forecast

Profit for the year will be at least $3.20 a share and possibly as much as $3.40, the company said. Carnival was previously predicting $3.10 to $3.40 a share.

Advance bookings for the rest of 2016 are “well ahead of the prior year,” with prices slightly higher, Carnival said in the statement.

Demand in China is driving up prices around the world as cruise operators relocate ships to that region, said Jared Shojaian, an analyst with Wolfe Research LLC.

“China is eating up supply worldwide and leading to better pricing,” Shojaian said. 

The share of Carnival’s capacity serving the Chinese market will increase to 8 percent or 9 percent by 2020, Donald said on the call, up from about 5 percent now. The cruise line currently operates six of its 99 ships in China, from the Costa and Princess Lines. It plans to introduce the namesake Carnival and Aida brands there in 2017. Carnival’s various lines also include Seabourn, Holland America and Cunard.

Carnival is expanding into Cuba too. Last week the cruise line became the first in more than 50 years to win permission from the Cuban government to sail there with its Fathom brand. The company has already started the approval process to add more cruises to the island in the months ahead, executives said on the call.

Before it's here, it's on the Bloomberg Terminal.